Rising property prices are continuing to defy the doom-mongers, and rents
haven’t moved for the past two years — so it is no surprise
plenty of landlords are selling up. Yolande Barnes, head of residential
research at Savills, says that a significant amount of landlords are indeed
putting up For Sale boards. But, she says, don’t confuse this with the white
flag.
“I would be very surprised if people weren’t selling,” she says. “If you think
that they started buying in the late 1990s, there will be some who will
consider it time to realise those gains.”
Is this because they believe house prices have reached their peak? Maybe,
concedes Barnes. Yet the buy-to-let market is not shrinking; Barnes
estimates it continues to account for about 12% of the total residential
market.
“You shouldn’t see every sale as an exit out of the sector. Landlords may well
be selling, but may also be buying other properties with those gains.”
Or, they might be selling on to bigger institutions.
“European funds are very interested in British residential property
portfolios,” Barnes says. “But the big institutions won’t countenance
anything under a certain size. A portfolio worth less than several million
doesn’t interest them.
“So the name of the game now is to bring together big portfolios that will
interest them. And there is an emerging sector of companies doing just that,
putting together big portfolios of residential property that will then be
sold on to the insurance companies, the usual investing institutions.”
You don’t even need an empty flat to get into the investment portfolio game.
“Oh, yes, there is an emerging market for portfolios of already-let
properties,” says Barnes.
Lenders haven’t witnessed any slack either. “We’ve seen some guys doing some
profit-taking if they reach a high level,” says David Whittaker, managing
director of Mortgages for Business, using delightful City-speak to confirm
that, yes, landlords are selling. “But there is no wholesale sell-off.” He
thinks it’s more about a trend for flogging the chic apartment only to
replace it with a derelict building.
“Most people start out in buy-to-let with properties that are ready to let,
with no issues. Then, in time, they sell these properties and go on to buy
places they can refurbish and then let.”
Making far more capital gain that way, you see, because your building is now
worth more than it was as a ruined dump.
“This type of landlord is in there for the long term, and is very active,”
says Whittaker. “And most of our work now comes from established landlords.
In 2006, nearly three-quarters (73%) of our activity on buy-to-let was for
existing landlords.”
“A lot of landlords are cashing in because they think the market has reached
its height,” agrees Ian Gardiner, lettings manager at John Wilcox, an estate
agency in Holland Park, west London.
“One of my clients has just sold three of his rental properties in Holland
Park, one for £1.8m, one for just under a million, and one for £1.2m. He
wants to buy something else, but he’s now looking for wrecks he can
refurbish. He will bank the money until he finds something.”
Landlords don’t want to wring the neck of the goose that has brought them so
many golden eggs. The only trouble is that there aren’t that many new geese
around at the moment.
“We have lots of landlords who have sold up, perhaps picking off properties in
their portfolio that don’t typically get a good return,” says Gardiner. “Now
they want to buy some more stock, but there is nothing around.”
Once you have your cash, it’s probably best to stick with the tried and tested
norm, if you are going to get back into the buy-to-let market.
“We are advising clients to sell and reinvest,” says Tim Hyatt, head of
lettings at Knight Frank estate agency, who says about 20% of his landlords
are considering selling up, slightly above the norm. “One- and two-bed flats
are always good. Always. If you have a good-quality flat, preferably in a
new block, close to amenities and neutral in style, it will let — day
in, day out. It’s a dead cert. In London, at least.”
Hyatt thinks that landlords should regard whatever they buy as “a totally
flexible investment that you can buy and sell, rather like any working
commodity”.
Vinoo Kumar is a landlord who, until a few weeks ago, had three studio flats
in South Kensington, with a total value of £900,000. Having bought them two
years ago for about £800,000, he has just sold them on.
“A lot of Russian and Indian money is moving into Knightsbridge and
Kensington, and prices are going up and up and up. So I decided to sell them
all. But I am reinvesting in Kensington and Chelsea. There are pockets where
I can still get £500 per sq ft, and I expect that to go up to £2,000 per sq
ft next year. I’m progressing on four deals right now. There is a lot of
cash around here, and I think prices will keep rising in this postcode,” he
says.
I’d say this looks not like a series of fire sales, more a mature market on
the move. You read it here first.
buytolet@sunday-times.co.uk
